Mediation Gone Awry, Marriage of Anderson

Mediation Gone Awry, Marriage of Anderson

Viola and Gary Anderson entered into a mediated property settlement agreement as a part of their divorce. The district Court approved the property settlement agreement and decree of dissolution. However, afterwards, Viola was less than thrilled with the agreement. She appealed to the Montana Supreme Court raising two issues: 1) Whether the district court abused its discretion when it denied Viola’s Rule 59(e) and 60(b) motions based on the district court’s failure to consider whether the property settlement agreement was unconscionable; and 2) Whether the district court abused its discretion when it determined that the property settlement agreement was valid without a disclosure of assets.

Mediation is a common and important part of most divorce proceedings in Montana. In fact, I would say a majority of my cases are resolved either by formal mediation or by negotiation. Mediation usually results in a faster and more cost-effective resolution. It also produces an outcome that the parties themselves have proposed. This can be much better than a judge making those decisions. But, problems can arise if there wasn’t full disclosure before the mediation, or if the mediation wasn’t conducted properly. In this case, Viola challenged the mediation because she believed that she was going to receive a lump sum cash payment of $3,000,000, and realized belatedly that she was only to receive $300,000.

Viola’s first challenge to the property settlement agreement was that it was unconscionable. As I’ve discussed before, the allocations of marital assets much not be unconscionable, and the district court is required to make that determination prior to entering the decree of dissolution of marriage. However, Viola did not raise this objection at the decree hearing. It appears, that at the time of mediation and the time the decree was entered, she had no objection to the property settlement agreement. Regarding conscionability, the MT Supreme Court had this to say:

The District Court (Sandefur, J.) noted that although Gary received the majority of the real property from the marital estate, Gary also took responsibility for all of the debt owed by the marital estate. Gary estimated that this debt amounted to $500,000. Gary’s certified public accountant submitted an affidavit stating that the Heaven on Earth Ranch and the ranch business had suffered a net loss of $83,000 from 2006 to 2011, and an additional $61,491 loss for bills that should have been paid in 2011 but were not paid until 2012, for a total loss of almost $144,500.

Much like the spouse in In re Marriage of Lawrence, Viola received an upfront payment of cash and assets, and a guaranteed income stream. Viola received almost $900,000 in cash and assets and $24,000 each year for the rest of her life. Gary received more assets than Viola, but he also accepted the risk associated with those assets and the debts associated with those assets.

Based on that, the Supreme Court found that the district court did not abuse its discretion in determining that the property settlement agreement was not unconscionable.

Next, Viola argued that the parties’ failure to disclose assets made the property settlement agreement invalid. Section 40-4-254, MCA, provides that “[a]bsent good cause, the court may not enter a judgment with respect to the parties’ property rights” unless the parties have provided a full disclosure of assets. In this case it is undisputed that no asset disclosure ever took place. However, Viola acted a bookkeeper for the ranch and guest ranch business for a number of years. Further, she didn’t allege that Gary misled her about the existence of an asset, or the value of any asset. Because of all this, the Supreme Court found that Viola had failed to demonstrate that she suffered any prejudice from the district Court’s entry of judgment without a final disclosure of assets.